Q2 2025 Stabillis Solutions Inc Earnings Call
Speaker #6: Please stand by. Your program is about to begin. If you need assistance on today's conference, please press star zero. Welcome to the Stabilis Solutions second quarter 2025 earnings conference call.
Speaker #6: At this time, all participants have been placed in the listen-only mode, and the floor will be open for your questions following the presentation. If ou would like to ask a question at that time, please press star one on your telephone keypad.
Speaker #6: If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your estions clearly.
Speaker #6: We ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Andrew Puhala, Chief Financial Officer.
Speaker #6: Mr. Puhala, please go head.
Speaker #7: Good morning. And welcome to Stabilis Solutions second quarter 2025 results conference call. I'm Andrew Puhala, Senior Vice President and CFO of Stabilis. And joining me today is our Executive Chairman and Interim President and CEO, Casey Crenshaw.
Speaker #7: We issued a press release after the market closed yesterday detailing our second quarter operational and financial results. This release is publicly available in the Investor Relations section our corporate website at stabilis-solutions.com.
Speaker #7: Before we begin, I'd like to remind everyone that today's conference call will contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws.
Speaker #7: These forward-looking statements are based on the company's expectations and beliefs as of today August 7th, 2025. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
Speaker #7: The undertakes no obligation to provide updates or revisions to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results.
Speaker #7: Investors are cautioned not to place undue reliance on any forward-looking statements. Further, please note that we may refer to certain non-GAAP financial information on today's call.
Speaker #7: You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today's call is being recorded and will be available for replay.
Speaker #7: With that, I'll hand the call over to Casey Crenshaw for his remarks.
Speaker #8: Thank you, Andy, and good morning to everyone joining us on the call. During the second quarter, our teams were sharply focused on operational execution and deepening our customer relationships within our marine, aerospace, and power generation end markets, which, as we've discussed before, are the promising long-term growth opportunities for the company.
Speaker #8: Commercial discussions with both new and longstanding customers are progressing well in all three end markets. We are working to secure long-term customer commitments needed to grow the business and allow us to make investment decisions on capacity expansion.
Speaker #8: During the quarter, we saw revenue and EBITDA decrease year over year, primarily due to the successful completion of a large short-duration industrial project last year.
Speaker #8: However, revenue in the three key growth end markets continued to expand with marine, aerospace, and power generation sector revenues up a combined 15% year over year, driven by an 83% increase in aerospace revenues.
Speaker #8: In the first half of the year, aerospace revenues have more than doubled from the same period in 2024, and we expect growth in this sector to continue.
Speaker #8: In the marine sector, we continue to perform well on our Gulf Coast bunkering contract with Carnival Cruise Lines. Growth in the sector is dependent on securing additional long-term customer contracts including contracts that will support our final investment decision for additional liquefaction capacity on the Gulf Coast.
Speaker #8: We are pleased with our progress on several potential LNG off-take agreements in the marine sector. In our power generation end market, we're seeing increased interest in LNG as a bridge and backup fueling solution to meet the rising electric demand from the data centers and other energy-intensive infrastructure.
Speaker #8: While this opportunity remains in its early stages, the projected long-term growth in electricity demand is creating a broad range of use cases for our LNG solutions.
Speaker #8: We are actively engaged with multiple customers as they explore reliable, scalable, options for distributed power. In conclusion, our strategic vision is clear. And Stabilis has significant long-term growth opportunities ahead.
Speaker #8: We're building Stabilis into the leading provider of last-mile LNG solutions with a focus on becoming the partner of choice for certain key end markets.
Speaker #8: Our team continues to execute against this vision demonstrating operational excellence and generating strong commercial momentum along the way. We look forward to updating you in coming months as we finalize new contract awards.
Speaker #8: With that, I'll turn the call back over to Andy to review our financial performance in detail.
Speaker #7: Thank you, Casey. I'll start with a discussion of our second quarter performance followed by an update on our balance sheet and liquidity. Our revenues during the second quarter decreased 7% compared to the second quarter of 2024.
Speaker #7: As Casey mentioned, the decline in revenues year over year was primarily the result of the roll-off of a large contract with an industrial customer that occurred last year.
Speaker #7: This decline was partly offset by an 83% increase in aerospace revenues and a 10% increase in our power generation market. During the second quarter, approximately 77% of our revenues were derived from aerospace marine and power generation customers compared to 62% in the second quarter of last year, as we continue to focus on these growth sectors.
Speaker #7: Adjusted EBITDA was 1.5 million during the second quarter compared to 2.1 million in the second quarter of last year. Adjusted EBITDA margin was 8.6% down from 11.3% in second quarter of last year.
Speaker #7: In addition to the roll-off of the short-term customer contract previously mentioned, EBITDA was negatively impacted by a non-recurring charge of approximately 0.2 million related to our foreign joint venture.
Speaker #7: Cash generated from operations during the second quarter was 4.5 million. The strong cash generation resulted in a record liquidity position of 16.1 million dollars at quarter-end consisting of 12.2 million of cash and approximately 4 million of availability under our credit facilities.
Speaker #7: With 8.4 million dollars in debt and lease obligations outstanding, we ended the quarter in a net cash position with no net debt and strong balance sheet flexibility that positions us to strategically deploy capital to support the growth of our business.
Speaker #7: Our capital expenditures were 0.6 million during the quarter. As discussed on previous calls, as we finalize new customer commitments and the related capacity expansion, we expect an acceleration in capital commitments.
Speaker #7: That concludes our prepared remarks. Operator, please open the line for the Q&A session.
Speaker #9: Thank you. At this time, if you would like to ask a estion, press star one now on your telephone keypad. The floor is open for questions.
Speaker #9: Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Martin Malloy, of Johnson Rice.
Speaker #9: Please go ahead.
Speaker #10: good morning.
Speaker #7: Morning, Marty.
Speaker #8: Good morning.
Speaker #10: first question, just wanted to ask about the, contractual agreements, off-take agreements that it sounds like you've got a number that are in the works, and it, it could be months within the next couple months that they're announced.
Speaker #10: And just wanted to, to get a sense if that was a correct, interpretation of, , of, your statements. And then also, the magnitude and the industry's, involved here and are these going to be of the size and, and tenor that would allow for project financing potentially?
Speaker #7: Yeah, Marty, why don't I start this, Casey, and then I'll Andy come back in and, and, add some additional color? The way we're we see this is really all three of those growth segments that we talk about, both the marine, aerospace, and power generation, distributed power generation business, all of them have contracts that we're working on with multiple customers.
Speaker #7: And we have you ow, we're always in the in the business of signing new, customer agreements. And when we think about, you know, duration, some are six months and then some of them e, keep getting extended and, and can go for multiple years.
Speaker #7: so, you know, they're all different in duration. but, we're ing on them in all three segments numerous contracts in all three segments. If we want to then kind of shift into kind of how those are going to allow us to deploy capital if we would if we if we want to talk aerospace, we're working on a, a number of additional contracts there that would allow us to support additional capital expenditures.
Speaker #7: To, fulfill those or to support those contracts. Power generation, the same or distributed power. And then, you know, probably the most, pointed question would be more around the marine sector where we're working on a Gulf Coast liquefier.
Speaker #7: to support the marine market. And that is where we've got a number of very large off-take agreements that we're working on finalizing the contracts on.
Speaker #7: And those would be enough to support FID and project financing around a project for that. So, Andy, may I have some additional color on that?
Speaker #7: But, I wanted to just cover it's all three segments. Have different contracting and, and, and work around those that are that are much longer-term in duration than just kind of spot work.
Speaker #7: Yeah, that-that's right. And just to add to that, I mean, these are multi-year off-take agreements with, you know, with firm commitments.
Speaker #10: Okay. thank you for that. And then for my follow-up question, just wanted to ask about, the timing of, of once these contracts are announced.
Speaker #10: I ow you've got some equipment at George West for, potentially doubling of capacity. they're eplace else. You've, you've long lead time. Equipment already purchased.
Speaker #10: Could you make it sounds like this you've got potential agreements that would cover LNG needs in excess of that. Can you talk about the timing, of getting additional liquefaction capacity online and in the meantime, would you source it the LNG potentially from other sources?
Speaker #7: Yeah. L-let me start it. So first of all, you know, I'll take you back to the three big end markets that we're working in: marine, aerospace, and power generation.
Speaker #7: And if you think about power generation, and what distributed power specifically around data centers and AI, you know, all of that is happening around the whole United States.
Speaker #7: And one of the things to remember about Stabilis is we don't only make our own LNG. We have supplier arrangements with, ou know, 30-plus other liquefiers around the United States.
Speaker #7: So the power distributed power generation market, you know, it-it's going to determine if we're going to add liquefaction capacity or if we're going to deploy what we have as the fleet of the last-mile liquefa last-mile LNG equipment, which is the on-site story and the vaporization equipment, which is very valuable, which we already have, in our fleet.
Speaker #7: So we already have that part of it. And if it's close to one of our liquefiers, we'll get our own LNG. If it's not, we'll use one of our third-party off-take agreements.
Speaker #7: When you're thinking about aerospace, it's a lot the same but the quality component of the, liquid really requires it to be from specific places.
Speaker #7: So a lot of that ends up coming out of our own liquefiers. And then when you're talking marine, that would take a larger facilities, to do on-the-water barge work and, that'll take new capacity.
Speaker #7: So if you talk deploying new capacity, the quickest new capacity would probably be in George West. We already have the facility there. we've already got the long lead equipment.
Speaker #7: We can do that. Quickly. We're also secondly working on our Gulf Coast liquefier right now. We're spending money on engineering and, and pre-feed work to prepare to deploy that.
Speaker #7: But that's a little bit longer than what you uld get done at our site in George West.
Speaker #10: Great. Thank you. I'll turn it back.
Speaker #9: Thank you. And once again, to ask a question that is star one on your telephone keypad. Our next question is from Tate Sullivan of Maxim Group.
Speaker #9: Please go head.
Speaker #11: Hi. Thank ou. Good morning. I'm Casey. Thanks for the comments on the Gulf Coast liquefier. And does completing that, is that the key variable to finalize some of the contracts you mentioned in the marine sector, or does are there other variables to finalize those contracts such as port infrastructure?
Speaker #7: Yeah. First of all, Tate, thanks for being on the call today, and we welcome your question. Maybe I need to clarify a little bit.
Speaker #7: I may not have communicated it very well. The contracts are kind of the front-end part, and then those would anchor the project financing to then put it in.
Speaker #7: So we're already actively working on and doing marine bunkering projects, you know, every day of the week in the Gulf Coast. as we stated with, one of our good crews, customers.
Speaker #7: And we're doing that through a truck to ship process, truck to barge ship process. these contracts that we're working on will underpin putting a new facility what we call on-the-water so that we can produce the LNG needed for those contracts, you know, on the water when I say on the water, next to the water, where we 't have to truck the LNG in.
Speaker #7: So really what we're waiting on is these, contracts that are long enough and tenure and duration to underpin the project financing so we can make the final investment decision to move forward.
Speaker #11: Oh, okay. Thank you. And, and for, for those marine contracts, can you share is it still mostly with cruise ship customers, or is it other types of shipping customer discussions?
Speaker #7: We are having numerous discussions with multiple end markets around the marine space. So if it's okay, Tate, we'd prefer to not share the details of all the different customer work we're doing around there.
Speaker #7: But we're definitely deep into the cruise space as we're currently delivering into that market today.
Speaker #11: All right. Thank ou, Casey. Have a good .
Speaker #7: Thank ou.
Speaker #9: And once again, to ask a question that is star one on your telephone keypad. We'll take ur next question from Spencer Lehman. Your line is open.
Speaker #12: Oh, hi, gentleman. and, hi, Andy. yes, yes. There's, you know, there's a lot , you ow, the macro picture for LNG is this, you know, very attractive and, and, a, a lot going on.
Speaker #12: with that, a couple weeks ago when, they announced that, the Europe was going to spend, what, $750 billion in purchases and, certainly the, the, the, the overall picture, is, is, just great for energy and, and especially LNG.
Speaker #12: and a lot of, of course, a lot of hype on data centers. i-it just seems like there's a tremendous amount of, of, need for energy in the country.
Speaker #12: And, I mean, what also with the administration is certainly supporting that whole area. So I, I think you're sort of in a sweet spot here but the stock's sort of, you know, it's a company.
Speaker #12: It's off the radar. And I'm curious what, what you're doing now or, or could do, to get to, you know, really get the story out.
Speaker #12: Well, Spencer, that's a this is Casey. Well, let me start with.
Speaker #7: Casey, I'm Andy. I'll Andy kind of come back on it and, and do some, do some additional, color and clarification. and I appreciate your question.
Speaker #7: And as a meaningful shareholder of the company, I feel the same thoughts around that, that you just shared there. Like, when I think me being a shareholder of Stabilis and, and, and being here you know, we've been in we started Stabilis in 2012.
Speaker #7: So we've got over a decade of just high, active real work in LNG. We've delivered just a ton of real product and a ton of real customers.
Speaker #7: We've got an amazing team of operational people. Amazing team of the business development engineering and just overall staff. And we're doing it every day of the week.
Speaker #7: And we have these big growth end markets that can just take the company and have an a have a, a, a step change in both size, of revenue, and earnings and so when I think about my investment in Stabilis, I'm, I, I think about a, a cash flow generating positively operating LNG platform.
Speaker #7: It's actively working on growing itself in three dynamic end markets. To me, it's a great place to be. And when I think about long-term you ow, I think Buffett or someone said that, you know, the stock market is a short-term, you ow, people talk about it's a it's a it's a it's a you ow, long-term, it's a weighing machine.
Speaker #7: So as we continue to hit some of these long-term contracts and grow the company, other investors will come in and want to be part of this amazing position that Stabilis is in.
Speaker #7: A current operating cash flow generating great small business with options to grow the business extremely large in these three end markets. And, I think it's a at place to be.
Speaker #7: I'm delighted to be a shareholder personally. proud of it. And I think over time, other people will find that out and will join up as we hit our strategic vision for the company.
Speaker #7: And then I'll turn it over to Andy on, like, tactically what, what your question might be. Yeah. Thanks, Spencer. Just to add to that, I mean, look, you know, we're, we're eager to get out and talk to the market and tell, tell people what we've got going on at Stabilis.
Speaker #7: And think that, you know, the the key thing there is to get some these contracts so that we have an opportunity to go out and have something exciting to talk about in the marketplace.
Speaker #7: And we, you know, as Casey mentioned, we think we're close on several you know, transformative-type-type projects. And then we've got the opportunity to go out and, and, and, and give people some specifics to, to, to really think about and understand what that means for, for Stabilis.
Speaker #7: you know, until we have some of those specifics, it's, it's kind of hard sometimes to get people as excited as we are about the opportunity.
Speaker #7: But believe me, we're excited. You know, we don't we don't get too focused on the kind of the quarter-to-quarter minutiae because, you know, we think that this is really a long-term a long-term growth story.
Speaker #7: And, you know, we're, we're, you know, we're, we're very bullish about it.
Speaker #10: Well, thank ou so much. Thank you, Casey. That was very, encouraging and, and enlightening and, my only problem is I'm going to, be nighty here in a few months.
Speaker #10: I'm, I'm running out of time. So don't, don't wait too long.
Speaker #7: Well, we're, we're not we're not we're waiting. We're actively.
Speaker #10: I know. I know ou're not.
Speaker #7: Investing and, and, and the in the business and the growth sections to have that step change and transformational deal. And, and, you know, when I think about where Stabilis is going be in the next three, five, and ten years, it's really exciting it's exciting to be in the LNG manufacturing and distribution and part of that value chain of the gas and, Stabilis is a great platform of that.
Speaker #7: And I think, Spencer, that, 90 years is, a young is young these ti now. And I think we look forward to many more years with you as a shareholder and, and.
Speaker #10: Well, I'm sure I'm, I'm, I'm, I'm definitely a -term but, long-term now is like, you know, four or five years. So, yeah. But, I, I this is a great atmosphere to be in right now with LNG.
Speaker #10: And I, I'm excited about that. And I think, I think things are ready , to really happen, for you guys. So thank you.
Speaker #7: Thanks, Spencer. Thank ou.
Speaker #9: Thank ou. Thank you. This does conclude the question and answer portion of today's call. I would now like to turn the floor over to Andrew Puhala for closing remarks.
Speaker #12: Thanks, Leo. And, and thank you for all that joined us today. We appreciate your time and continued interest and support for the company. If you have any additional questions or simply want to learn more about what we're what 're building at Stabilis, please contact me at our investor relations number.
Speaker #12: this concludes our call. And thank you very much.